Student Pleads Guilty in Wire Fraud Case

Posted by Ilse Narvaez.

Oladipupo Kupoloyi, an 18-year-old Nigerian living in Binghamton, NY, pleaded guilty to his participation in a wire fraud conspiracy. Kupoloyi was a student at SUNY Brome Community College through a student visa. The wire fraud statute involves fraud by wire, radio or television. According to the statute 1343, it applies to anyone having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent statements. A person involved and found guilty may be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. In order for someone to be found guilty, the government must show there was an interstate wire used and intent to defraud.

An investigation by the U.S. Department of Homeland Security revealed that Kupoloyi had wired unlawfully obtained money to Nigeria using two different banks located in Binghamton. The fraud involved thousands of dollars that were sent overseas and Kupoloyi was unemployed and had no other source of income. One of his co-conspirators obtained money through the mail by requesting funds from a 65-year-old woman, while posing as a military representative stationed in Nigeria. Later, another co-conspirator contacted the same woman but in this case, claiming to be a U.S. Customs service agent. He advised the woman that he had valuable jewelry that could be released to her if she paid between $48,000 to 50,000. Since the woman did not have the money available they asked for her personal information such as social security number and opened bank accounts with it. Money from an unidentified business bank account was then transferred into the victim’s personal accounts (Borrelli).

Kupoloyi’s participation occurs when the woman is asked to withdraw the amounts and to purchase U.S. Postal, Western Union and Monegram in order to send them to his personal address. Kupoloyi then opened a bank account in M&T Bank and a second one in Citizens Bank. He deposited $81,000 and 28,000 respectively, and wired funds to Nigeria on two occasions. M&T Bank suspected bank fraud when for a third occasion, a fund wire to Nigeria was requested. The bank reported the suspicion to the federal investigators that later found about the scheme. On November 6, 2015, Kupoloyi pleaded guilty to conspiracy to commit bank fraud, mail fraud, and wire fraud. His sentence is expected to occur in March 25th, 2016.

Ilse is a graduate student in accounting with a certification in forensic accounting at the Feliciano School of Business, Montclair State University.

Works-cited

Borrelli Anthony, “SUNY Broome Student Pleads Guilty in Wire Fraud Case.” Pressconnects.

Web.

Tracking Americans’ Phones

Posted by Samar Baeshen.

The Fourth Amendment to the U.S. Constitution reads” The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” The amendment protects people from unreasonable searches and requires the police to have a warrant. However, there are a considerable amount of debate of whether the cell phones of people who are arrested can be searched without having a warrant.

According to an October 21, 2015 news article in the NBC news, “Feds detail how they secretly track Americans’ phones.” In a testimony, some long-concerns about how Feds utilize secret devices to track Americans ‘cell phones were clarified by Federal law enforcement officials. Regarding the secret devices, for many years police have been utilizing Stingray device which connects someone’s phone with cell phone towers.

Congress has been informed that Stingray devices are not using to track calls or messages but to locate someone. Moreover, new rules have been issued by the Department of Justice regarding the lack of warrants of tracking cell phones. However, agency officials confirmed that there are some situations do not require warrants. Therefore, many arguments have been raised that Americans’ phones ought to be protected according to their Fourth Amendment rights.

Lastly, according to ACLU technologist Christopher Soghoian, the nation’s leading expert on Stingrays, the FBI has begun using the device for almost 20 years, and this is the first congressional hearing. The agreements about Stingrays between the FBI and local police are secret. However, due to the legal battles led by the American Civil Liberties Union this becomes public.

Samar is a graduate student in accounting at the Feliciano School of Business, Montclair State University.

Growth in Need for Forensic Accountants

Posted by Daniel Perez.

The demand for forensic accountants has been growing rapidly in recent years, especially in divorce cases of the ultra-wealthy. In an article published in Forbes in September, Russ Alan Prince cites divorce by the wealthy as being a key area that drives the need to hire forensic accountants. The rationale behind this drive in demand is that the services provided by forensic accountants is best in the market in determining the true economic value of a couple’s financial assets.

In most wealthy divorce cases, spouses often attempt to conceal assets and inaccurately state their income. This foul play is a common practice in the today’s landscape says practicing forensic accounting James DiGabriele:

It’s impossible to appropriately divide marital assets if everyone doesn’t know just what those assets are and what they’re worth. High-net-worth couples generally have a number of types of assets such as investment portfolios, businesses, collectables, partnerships, and the list goes on. Divorce lawyers are not the professionals that are going to be able to determine the value of all the different assets. That’s the job of the forensic accountant.

The fundamental analytical skills used by forensic accountants qualify them as key players in attempting to circumvent tactics used by spouses to hide assets and income. Forensic accountants investigate these divorce cases in their fundamental training and continuing education in order to meet the prevalence of these cases in practice.

Director of Geltrude & Company’s divorce practice, Ellen Rabasca reaffirms just how common it is for spouses to conceal marital assets in order to reduce their financial liability after the divorce: “When assets are held in trusts or partnerships, or located in different jurisdictions, getting a valuation can be complicated. Also, the valuation of retirement plans, deferred compensation arrangements, and life insurance programs all require the expertise of a qualified accountant.” Forensic accountants offer the services of reviewing tax returns, confirming bank balances, tracing financial transactions, and most importantly, maintaining a high degree of professional skepticism and inquiry in order to determine the true value of assets spouses possess.

Daniel is a graduate student in accounting with a certificate in forensic accounting at the Feliciano School of Business, Montclair State University.

US Supreme Court Debates on Conspiracy Charge

Posted by Ilse Narvaez. 

A conspiracy occurs when two or more parties agree to commit a crime. The crime is complete when the agreement is made. The four elements of conspiracy are an agreement, unlawful object, knowledge and intent, and an overt act. The prosecution has to prove there was knowledge of the conspiracy and the target of the conspiracy. The Hobbs Act prescribes criminal punishment for “whoever in any way or degree obstructs, delays, or affects commerce by extortion” (Justice.gov 7).

From May 2009 to February 2011, Samuel Ocasio, a Baltimore police officer, and approximately 50 other police officers were involved in a kickback scheme. During the scheme, police officers working at automobile accidents, encouraged people to use the services of Majestic Auto Repair Shop for towing and repairs (Reuters). In return, the owners of Majestic Auto Repair Shop, Hernan Moreno and Edwin Mejia, paid the officers between $150 and $300 per referral. Payments were collected the next day usually at Moreno’s home, an ATM, or a convenience store. The City of Baltimore already had contracts with pre-approved towing companies that did not include Majestic. In addition to his, officers were prohibited from accepting any compensation, gifts, or rewards without the Police Commissioner’s permission. The scheme was discovered when federal agents were wiretapping Majestic, and recorded scores of calls connected to the kickbacks (Chicago Tribune).

A grand jury indicted 9 police officers including Ocasio, and the Majestic owners, in connection with the kickback scheme. Ocasio was convicted of three charges of extortion and one charge of conspiracy and sentenced to 18 months in prison for his participation. Ocasio argued against the conspiracy charge, since he believed he could not be guilty if the money was obtained from Moreno and Mejia whom were co-conspirators. The court denied this because Majestic, not its owners were actually the source of payments. The court also mentioned that the government did not have to prove that the conspiracy was to obtain money from someone outside of the conspiracy.

After convicted, Ocasio appealed to the U.S. Court of Appeals for the 4th Circuit. His argument was that “conspiring to extort property from one’s own coconspirator does not contravene federal law” (Justice.gov 9). The court of appeals affirmed the previous conviction for various reasons. The court held that a person who actively participates in a conspiracy scheme can be prosecuted as a co-conspirator even if he is also a victim of the agreement. This relates to the basic conspiracy rule that mentions that a conspirator is responsible for his actions as well as for the actions of his co-conspirators. In this case, Ocasio may have taken money from Moreno and Mejia instead of customers, but he is responsible for the actions of the brothers as well. The court also disagreed that “the Hobbs Act’s ‘from another’ language requires that a coconspirator obtain property ‘from someone outside the conspiracy’” (Justice.gov 9). This simply means that someone other than the public official.

Due to the affirmation of the conviction by the U.S. Court of Appeals, Ocasio decided to take the case to the U.S. Supreme Court. The U.S. Supreme Court decided to take the case that will only have an effect on the conspiracy charge. The Supreme Court is expected to rule in the case before June.

Ilse is a graduate student in accounting with a certificate in forensic accounting at the Feliciano School of Business, Montclair State University.

Works-cited

Justice.gov “In the Supreme Court of the United States.” Ocasio vs. United States of America.

Web. .

“U.S. Justices Weigh Baltimore Cop’s Kickback Conspiracy Appeal.” Reuters. Thomson

Reuters, 06 Oct. 2015. Web. http://www.reuters.com/article/2015/10/06/us-usa-court-conspiracy-idUSKCN0S02LR20151006#7Kh5jkDcFhxjWb05.97

“At the Supreme Court, a Case for Fans of ‘The Wire’” Chicagotribune.com. Web..

When The Wealthy Divorce, They Regularly Engage Forensic Accountants

Posted by David Cadorett.

There are many reasons that a business might hire a forensic accountant; however, one may hire a forensic accountant if they are a wealthy married couple in the process of a divorce. The spouse with less income would be most likely to hire the accountant to make sure their significant other is not hiding any assets. Partners in business that no longer trust each other may also be inclined to hire a forensic accountant.

“According to James DiGabriele, professor of accounting at Montclair State University, one of the foremost forensic accounting programs in the country, “It’s impossible to appropriately divide marital assets if everyone doesn’t know just what those assets are and what they’re worth. High-net-worth couples generally have a number of types of assets such as investment portfolios, businesses, collectables, partnerships, and the list goes on. Divorce lawyers are not the professionals that are going to be able to determine the value of all the different assets. That’s the job of the forensic accountant.” This quote from the article states how lawyers are not properly equipped to find these types of assets, which is what Professor DiGabriele is trying to show.

With wealthy divorces, there are large amounts of money that need to be accounted for when dividing assets equally. This process is not easy and requires a team of professionals that have a large amount of experience in this area. The skill set of a forensic accountant works hand in hand with lawyers that are involved with divorce cases. The forensic accountant needs to be unbiased when making his evaluation in the division of the assets. If the judge feels that bias has persuaded the evaluation to go a certain way, the accountants’ credibility will be tarnished, and possibly forced out of the profession.

David is a graduate student in accounting with a certificate in forensic accounting at the Feliciano School of Business, Montclair State University.

Wells Fargo Fined $81.6 Million for Violating Federal Bankruptcy Rules

Posted by Carter McIntosh.

On November 5th, 2015, the Department of Justice announced that Wells Fargo failed to notify bankrupt homeowners of mortgage payment increases. Wells Fargo was required to pay out $81.6 million to “homeowners after reaching a settlement with the Department of Justice’s U.S. Trustee Program over the banks ‘repeated failures’ to provide Bankrupt homeowners with legally required notices of mortgage payment increases.” The Federal Bankruptcy Rule 3002.1 requires mortgage creditors (Wells Fargo) to file and serve a notice 21 days before adjusting a Chapter 13 debtor’s monthly mortgage payment.

The failure that sparked Wells Fargo’s fine was the fact that in Chapter 13 bankruptcy cases they did not file and serve the mortgage lenders with a notice 21 days before Wells Fargo adjusted the monthly mortgage payment. In fact, when the DOJ pursued this case, “Wells Fargo acknowledged that it failed to timely file more than 100,000 payment change notices and failed to timely perform more than 18,000 escrow analyses in cases involving nearly 68,000 accounts of homeowners in bankruptcy between Dec. 1, 2011 and March 31, 2015.”

The $81.6 million settlement that Wells Fargo agreed to pay to the homeowners within the time period listed above is made to several different groups of borrowers. The first group, which consists of $53.6 million of the $81.6 million, will go to “more than 42,000 homeowners whose payments increased as to which Wells Fargo failed to timely file a PNC with the court, each homeowner will receive on average $1,254.”

The next group, which consists of $10 million, will go to “crediting homeowners’ accounts at the end of their Bankruptcy cases.” The third group, which consist of $1.5 million, will go to “refunding in cash about 3,000 homeowners where notices of decreases in monthly payments were not timely provided and the homeowners paid more than the actual amount.” The fourth group consists of $1 million and will go to “refunding in cash to about 2,400 homeowners who satisfied escrow shortages by making a lump sum payment.” The fifth group consists of $4.5 million and will go to “crediting mortgage escrow accounts of about 6,000 homeowners who did not receive timely escrow statements.”

The sixth group, which consists of $4 million, will go to “paying about 12,000 homeowners by crediting mortgage accounts where Wells Fargo failed to timely perform an escrow analysis.” The seventh group, which consists of $4 million, will go to “refunding in cash about 6,000 homeowners who did not receive timely escrow statements.” The eighth and final group, which consists of $3 million, will go to “remediation to about 8,000 homeowners which has already been completed.”

According to Director Cliff White of the U.S. Trustee Program, he is “pleased that Wells Fargo has acted responsibly by accepting accountability for its deficient bankruptcy practices, agreed to compensate affected homeowners for those deficiencies and committed to making necessary improvements in its Bankruptcy operations.”

Carter is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.

Big Data and the Forensic Accountant

Posted by Kosta Arvanitis.

This article comes from the Journal of Accountancy, which is an overview and elaboration on a case study done by the 2014 AICPA Survey on International Trends in Forensic and Valuation Services. It describes the increasing demand of newer IT skills with the continuing rise in Big Data. “Big Data” are particularly large data sets that are analyzed computationally to discover patterns and trends relating to human behavior and interactions. With these large data sets, comes the need for the skills to analyze and come up with a conclusion on the behavior of those responsible for the data. Specifically, investigations in corporate accounting crimes typically involve analyzing extremely large sets of data that require certain skills to correctly interpret, in order for an attorney to be able to use during litigation.

There is an increasing demand in higher level data analysis capabilities for large sets of data. Tim Bryan, forensic accounting and technology services senior manager at Crowe Horwath in California, talks about one of his engagements involving a government agency whose investigation required an analysis of sales data over a three year period.  He explains how difficult and lengthy the process is in tying the data to a source, synthesizing it all into something an attorney can use to defend the client, and even just getting it into a usable format (Journal of Accountancy 3). Working with millions of lines of data, as he describes, comes several issues in validating the data into a theory to use in a trial. As a result, he goes into saying that at his firm, database experience is crucial for CPAs; learning how to “slice and dice” data and make sense of it. For example, Bryan describes how Big Data is behind new cases he has seen in wage and hour litigation, where years and years of time-slip-level data for all employees are downloaded for analysis; this data pertaining to the clocking in and out of employees for lunch and normal breaks. The purpose of the investigation being to make sure that the employees are getting their meals and breaks.

Much of this article describes Tim Bryan’s thoughts on the subject of Big Data, since his firm deals with cases that involve Big Data. He emphasizes the fact that there are plenty of clients out there that need data analysis, and that they normally go to CPAs for this. There is an increasing demand for the skills needed for Big Data cases, in analyzing, synthesizing, and interpreting the data into a fathomable theory. Bryan believes that the “price is right” when it comes to learning the skills, and suggests that future CPAs take data analysis courses, or even minor in information systems, should one end up at a firm that deals with cases involving Big Data.

Kosta is a graduate student in accounting at the Feliciano School of Business, Montclair State University.

Reference: Journal of Accountancy. “Big Data case study: What forensic accountants need to know”. 1 March 2015. Web. 18 November 2015.

Valeant: A Timeline of the Big Pharma Scandal

Posted by Carter McIntosh.

Valeant is a very large pharmaceutical company that focused on creating a “drug giant that was focused on distribution.” Valeant “was” one of the hottest stocks on Wall Street; this stock was booming; the stock soared all the way to $260 in just months. Wall Street analysts and Hedge Funds loved Valeant and everyone wanted to own it. Valeant has been in the news lately, and it is not good news but rather some very bad news. Allegations now follow Valeant and whether or not they have true success or that there true success can be attributed to “price gouging: a secret network of specialty pharmacies; and fraud.” With these allegations surfacing, Valeant stock has “plummeted 60% in the last three months.”

Valeant has been under scrutiny for a while now, dating all the way back to August 14th, 2015. In August, Valeant was being scrutinized because they raised the price of their drugs. On October 5th, 2015, a study by a Deutsche Bank analyst finds that it is not just two drugs that they raised the prices. The report concludes that Valeant has jacked up prices on 54 other meds this year alone, by an average of 66%.” In response to this issue, Valeant CEO Pearson said during an earnings call on October 19th, 2015, that “Valeant will ease up on its strategy of buying up drugs that are mispriced and hiking the prices.”

On October 20th, 2015 “A report by Citron Research, run by activist short seller Andrew Left reveals more information about Philidor and it’s network of phantom captive pharmacies.” Left accused Valeant of committing accounting fraud; furthermore, Left compared “Valeant to companies like Enron.” Two days later on October 22nd, 2015, Valeant “called Left’s reports erroneous. The company says it hasn’t used Philidor to book false sales. It says Philidor is a separate company, but that Philidor’s financial statements are included in Valeant’s financial statements.” With this allegation surfacing Valeant shares have plummeted 30% in just three days.

As more and more information surfaced about Valeant’s relationship with Philidor, on October 30th, 2015, “Valeant says it is cutting ties to Philidor, and that the pharmacy will shut down immediately. Allegations have emerged that Philidor may have changed prescriptions to push Valeant’s high-priced drugs on patients, rather than the generics.” Bill Ackman, the largest shareholder in Valeant held a “four – hour conference call to defend Valeant,” as he believes in Valeant’s business strategy and that the company would not commit accounting fraud and price gouging. Unfortunately, this course of action did not help Valiant. In fact, after the Bill Ackman conference call, Valeant shares fell another 10%.

Carter is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.

Uber Taken To Trial

Posted by Catherine Caldwell.

The trendy new and convenient company, Uber Technologies Inc., is currently enduring a legal battle for its illegal classification of freelancers. Uber was founded in 2009, as an application that acts as an electronic link from individuals who have cars to individuals who needs rides. The company has received a reputation of convenience to its customers and an easy way to make profit for its drivers. However, attorney Shannon Liss-Riordan, a powerful attorney in the state of California, disagrees with the classification of Uber drivers.

Shannon Liss-Riordan is no stranger in her attack on large billion dollar industries such as Uber. She has made cases against Starbucks, Harvard University and FedEx, to name a few. Ms. Liss-Riordan thinks that Uber drivers are unlawfully “on-demand workers” with no benefits. Instead of freelancers, Uber drivers should receive employee status, which would include drivers receiving reimbursement of their transportation expenses among other employment protective benefits.

As a software intermediary in the transportation business, Uber Technologies Inc. claims that they do not need grounds for titling their drivers as employees. Uber does not have a “fleet of drivers” waiting to pick up the next customer, but is based on convenience for both the drivers and employees. Uber does not plan on settling the case and has begun their approach by assembling 400 statements from drivers saying they were content with the flexible labor opportunities. However, in retaliation, Liss-Riordan took 50 of those statements and found that those drivers stated they would like to have official employment status.

In September, the case won class action status in San Francisco and will continue in federal court. Valued at $51 billion and is willing to fight for their case all the way to the Supreme Court and are unwilling to settle.

This case will create a precedent in the industry of software application employment services, and therefore needs to be handled very tactically. The basic labor protection laws should not be ignored due to new forms of introducing a business such as Uber. However, each Uber driver participates to make profits on their own agenda. Some use the service for extra cash, where others, in the grueling unemployment climate, use Uber as full time opportunities. In my opinion, the court should require Uber to create employment contracts with Uber drivers who can prove that it is a major source of income.

Catherine is a finance and information technology major at the Stillman School of Business, Seton Hall University, Class of 2018.

US v. Newman – Insider Trading

Posted by Nikolina Stojkovic.

Insider trading just got a little easier, if you can use the right defense.  Based on the case United States v. Newman, insider trading charges were dropped based on what was considered wrong jury instruction and failure to show sufficient evidence for conviction. The case was tried in a New York district court. New York has joined the cavalry in trying to take down Wall Street crimes.  US Attorney General Preet Bharara took office about six years ago and arrested 100 people for insider trading, of whom 87 have been convicted1.

A little background of the case will help demonstrate what defense attorneys were able to accomplish in appeals. In January 2012, hedge fund portfolio managers Todd Newman and Anthony Chiasson were charged with securities fraud. In December 2012, they were convicted and, in May 2013, sentenced to lengthy terms: 54 months for Newman and 78 months for Chiasson1 for using information tipped to them about Dell and Nvidia via an intermediary. Newman earned $4 million and Chiasson earned $68 million as a result of the information received.2  The charges were overturned because the prosecution never linked a personal benefit received by the original tipper, not because Newman/Chiasson denied receiving the information.

According to the defense, their clients did not commit any crime because the tipper received no known benefit of relaying the information, nor did the intermediaries that passed along the information to Newman and Chiasson.  Rather, their actions were part of a business transaction based on information received.  It sure sounds like insider trading without the benefit requirement.

Nonetheless, the appeals court decided otherwise.  Their decision spurred a flurry of review on pending and previously decided cases, where guilty verdicts were found and admissions of guilt were allowed on insider trading matters. Based on the defense attorney’s argument, insider trading cases will become more challenging for the US Attorney General’s office.  In this matter, based on the charges, the defendants are not guilty.  However, had the tipper received quid pro quo in exchange for the information, Newman and the like, would be guilty of insider trading. Quid pro quo seems trivial in the matter, either you acted upon the information or you didn’t.

 Nikolina is a graduate student in accounting with a certificate in forensic accounting at the Feliciano School of Business, Montclair State University.

Sources:

1 http://fortune.com/2015/09/23/supreme-court-insider-trading-newman

2 http://www.bloomberg.com/news/articles/2015-10-05/insider-trading-cases-imperiled-as-top-u-s-court-spurns-appeal